ABC stores plan should be hashed out in public, Dems say

A proposal for privatizing state-run liquor stores, the signature initiative of Gov. Bob McDonnell's new government reform commission, will be drawn up not by the commission but by a separate workgroup meeting behind closed doors--to the concern of at least one member of the commission.

In opening remarks to the 31-member commission Friday, McDonnell Deputy Policy Director Michael Reynold indicated that the workgroup would pull together the administration's proposal for how to go about selling the state's 350 ABC stores and would present it to the commission sometime soon. Presumably the commission would then review those plans before making a recommendation to the governor.

Many Democrats have been skeptical of McDonnell's proposal to sell the stores to get cash for transportation improvements. McDonnell has said he believes the sale of the stores could bring in $500 million. But Democrats have said they believe that figure is inflated--and does not account for the loss of about $100 million that the ABC stores bring in each year as a reliable revenue stream for the state's general fund.

Those Democrats include Sen. Mary Margaret Whipple (Arlington), who serves on the commission. She said this week that developing the plans in private with a group largely composed of industry representatives makes her even more concerned about the whole concept.

"I'm worried they're going to come to one of these meetings and say 'here's the plan,'" she said. "I'm not sure I can vote for it in any case, but I certainly can't vote for it in that case."

She added: "I've said the commission can't just rubber stamp something that comes up from a group like that. We'd have to know the reasoning process they went through--what were the pros and cons were to how they decided we should do it."

"The administration has been meeting with business leaders and their representatives who are involved with the alcohol beverage industry since December," said McDonnell spokeswoman Stacey Johnson in a statement. "Some meetings are small, some are large. These are no different than any other meetings we conduct with private sector stakeholders on a vast array of issues. Once it's developed, a plan to privatize ABC will be presented to the members of the Governor's Commission on Government Reform and Restructuring for their review and approval."

McDonnell has indicated that his plan will involving a taxing structure for alcohol sold at newly private stores that would replace yearly income generated at ABC stores. But it will be no easy task for the work group to come up with taxes that accomplish that goal but do not significantly raise the cost of alcohol sold in Virginia.

Meanwhile, Senate Majority Leader Dick Saslaw (D-Fairfax) said Monday that he continues to believe the state's General Fund, which funds schools, police, health care and other government services, will lose out if ABC stores are sold.

He predicted there is no committee in the Democratic-led state senate that would approve such a plan.

"Right now, it's totally dead in the Senate," he said. "We're not going to give up $100 to $200 million a year for a one time shot at $150 million. We'd have to be some kind of idiots to do that."

Saslaw said he believed closed-door workgroups won't help McDonnell's cause: "Quite frankly, by doing it the way they're doing it, I think they're sealing its doom."

When they say "sell the stores," do they mean sell the 350 state run liquor stores to private parties and then those 350 private businesses will have a monopoly on liquor sales? Or are they just selling the buildings and inventory and anyone would be free to open a new liquor store if they wanted to.

This plan makes absolutely no sense. I'm getting really tired of public policy being driven by ideological considerations rather than practical considerations.

If you ask me whether I'd rather have state-run or privately-run liquor stores, I'd vote for the latter in a heartbeat. But given the current structure in Virginia, it makes absolutely no sense from a state revenue perspective to transition over.

For one, the value of the liquor stores is only achieved via a public monopoly. If the monopoly is destroyed, then no one in their right mind is going to be willing to pay all that much for the state-run liquor stores. The smart businesspeople will simply sit back and either make ridiculously low bids or set up new shops to compete with the former state-run liquor stores.

If, on the other hand, Virginia is planning to "privatize" the industry by selling the rights to its monopoly, then I'd have to question how that's to the benefit of anyone. I'd rather have a public monopoly (that is at least accountable to someone) rather than a private monopoly with no competition. That would be "privatization in name only."

So either Virginia is basically forfeiting a major cash flow stream at a time when everyone is worried about budgets - or - McDonnell is trying to set up something much worse than what we've got now, with a state-sanctioned private monopoly. He will then add a tax on top of this, so that prices will be significantly higher for consumers.

I'm more concerned about Virginia's finances than I am about having a privatized liquor industry in Virginia. This move will only result in higher taxes (possibly down the road as a major revenue source is cut) and a weaker fiscal state for Virginia.

In most instances the Commonwealth does not own the real estate where the stores are located. The real estate is owned by private concerns and on long-term to ABC. Any gains from privatization will be offset by the penalties for breaking those leases or the cost of continuing them despite the fact they will not be generating income.

Let me educate you liberals. It doesn't really matter what the state gets from the sale of the stores. What matter is the amount of tax revenue that will be generated as thousands of new stores open up to compete against each other. Lowering prices for customers, increasing sales, and boosting tax revenue.

So it doesn't matter if the state only gets $2.50 from selling stores. The future long term revenue will be a boon to state coffers.